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  1. #376
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Snatch Catch View Post
    This type of contract is only being discussed for two reasons:
    1. The Yankees are trying diligently to get under the LT for just one payroll period, and that period is this year.
    2. The Yankees have a ton of money and don't want to pass on top-tier talent if they can help it.

    Otherwise I have no doubt this type of contract is not being discussed. If they weren't getting under the LT this season they wouldn't be trying to game the system for the first year or two on the deal.
    Yes, I'm aware, but the same goal is accomplished by a straight $20M/yr contract without the added complexity/uncertainty introduced by this accounting trick. Maybe Yu is more into it with the opt-outs, the Yankees should be less into it for the same reason (and Yu has no deal of any kind right now).

  2. #377
    2009 WORLD CHAMPIONS aeromac76's Avatar
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Jace View Post
    Why not just offer him 6/120 with zero opt outs then? Same AAV, trade value not ruined by opt-outs, and almost certainly a better offer than anything he currently has. And I wouldn't even go that high.

    The structure of that deal basically says actual money means absolutely nothing to the Yankees, only AAV calculations. Which I really doubt. While there are some draft pick penalties for going over the tax threshold, they are mostly financial penalties, so it seems silly that the Yankees would try to avoid those financial penalties by paying them in a different way.
    Looking at this in only a Darvish perspective, I would agree..
    But we have been over the tax limit for so many years that the penalty for every dollar we go over is 95%, so ever dollar over the threshold we are we pay a 95% percent tax, or more simply, we pay $1.95 for every single dollar over the thereshold.

    Staying under for one year resets the penalty for the next time we do go over to 20% on each dollar we are over the limit. So if we can structure Darvish's deal so that it is appealing to him and keeps us under the threshold, it does more to help us for next years' bonanza..

    For instance, let's say we reset the tax this year, the limit is 197, and our final payroll is 190.
    Boom, we good. Now next year we sign Harper to a 10 year 400M dollar deal. That's a 40M AAV, and takes our 2019 payroll to 230M. We'd pay a 20% tax on the over of 197M, which is at this point 33M. Twenty percent of that is 6.6M. That would be our tax next year, bringing the total payroll expenditure to 236.6 M.

    Now do the same, but without the reset this year, the tax is now 95% for that 33M, which is 31.4M, bringing our total expenditure to 261.4 M. That lack of reset costs us 24.8 M, in one year.
    That alone offsets the up front money to Darvish. And when we taker into account the per annum penalty, we can get into perhaps the 100s of millions of savings over the life of a Harper (or Manny/Kershaw.whomever) contract..
    I used to think I was crazy... Now I am sure of it..

  3. #378
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Jace View Post
    Any $20M AAV without opt-outs will accomplish that with less collateral damage. This is creative for sure, but so were the collateralized debt obligations invented by investment banks to make the mortgage market more liquid. Maybe a strange analogy, but you are introducing complexity that severely clouds the value of an asset.
    But the asset in this case has emotions and feelings, and will make a decision based outside of your control once you present your offer - it's not up to the Yankees at some point. This contract is a means of enticing a player that otherwise may not have been interested in you by giving him higher money upfront and options, but still keeping your primary goal - a short-term one - in tact.

    Ignore the 6/120, because that gives the impression the Yankees are above everyone, which isn't the case in this scenario. Lets say everyone is offering 5/90, but the Yankees are the only ones structuring their 5/90 offer in Sherman's way. He likely chooses the Yankees.
    Jaret Wright's 2005 Cy Young Season: 20-3, 3.04 ERA

  4. #379
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Jace View Post
    Yes, I'm aware, but the same goal is accomplished by a straight $20M/yr contract without the added complexity/uncertainty introduced by this accounting trick. Maybe Yu is more into it with the opt-outs, the Yankees should be less into it for the same reason (and Yu has no deal of any kind right now).
    The concept behind this entire contract structure is based on the offers from the 5-6 teams being roughly equal. It's not about out-distancing the competition in money or years, but instead upfront money and flexibility to the player.
    Jaret Wright's 2005 Cy Young Season: 20-3, 3.04 ERA

  5. #380
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by aeromac76 View Post
    Looking at this in only a Darvish perspective, I would agree..
    But we have been over the tax limit for so many years that the penalty for every dollar we go over is 95%, so ever dollar over the threshold we are we pay a 95% percent tax, or more simply, we pay $1.95 for every single dollar over the thereshold.

    Staying under for one year resets the penalty for the next time we do go over to 20% on each dollar we are over the limit.
    First of all, the highest tax rate is 50% from everything I've read. Not sure where 95% is coming from.

    Second of all, 6/120 is a $20M AAV no matter what. 20 for 6 straight years. 30 for 2 straights years and then 15 for 4 years. It's the same. So this is just a gamble to entice Yu with things that help him and hurt the Yankees, when he doesn't even have a 6/120 offer anyway.

    You can't trade that contract. You can't plan your future budget or rotation. You set a weird precedent for future free agents. I don't see the gains outweighing the losses (which include a MASSIVE amount of money spent up front, which also means you pay for the time value of money).

  6. #381
    Better than you teknetic's Avatar
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    Re: MLB free agency: Yankees targeting Yu Darvish

    The $20M AAV still doesn't work with what they have left to spend. Gonna require trading Gardner/Robertson anyways and I'm not sure its in the team's best interest to do either.

  7. #382
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Snatch Catch View Post
    The concept behind this entire contract structure is based on the offers from the 5-6 teams being roughly equal. It's not about out-distancing the competition in money or years, but instead upfront money and flexibility to the player.
    I think you're winning a prize you don't want by removing a lot of the surplus value. Sure, the upside is great, but you're creating strange downside scenarios that don't normally exist. And you may win the negotiation straight up.

  8. #383
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Jace View Post
    I think you're winning a prize you don't want by removing a lot of the surplus value. Sure, the upside is great, but you're creating strange downside scenarios that don't normally exist. And you may win the negotiation straight up.
    I'm not arguing with any of that.

    If Yu is their guy though, he's the type of pitcher that is generally in low supply and they might view this window, in a depressed market, as a great chance to procure a relatively rare asset.
    Jaret Wright's 2005 Cy Young Season: 20-3, 3.04 ERA

  9. #384
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    Re: MLB free agency: Yankees targeting Yu Darvish

    Opt outs do not bother me at all. Let another team pay for his decline years.
    David Ortiz tested positive for performance enhancing drugs in 2003.

  10. #385

    Re: MLB free agency: Yankees targeting Yu Darvish

    "Yu Darvish, via Twitter, has indicated six teams are pursuing him in free agency, and Brian Cashman has copped that the Yankees remain among the interested.
    But it would take creativity for the Yankees to sign Darvish and even with the below plan, they still might have to find a way to offload a piece of Jacoby Ellsbury’s contract or deal David Robertson as a way to stay below the $197 million luxury-tax threshold.

    The question is: How can Darvish get what he wants while the Yankees keep the average annual value (the number used for luxury-tax purposes) down?
    We have to begin with a few suppositions, namely that Darvish has yet to hear the terms he wants or hear them from a team to which he wants to go, or else why would he still be unsigned three weeks into the new year? The general expectation was that he would get $25 million-ish annually for six years when this offseason began.

    My concept would be to offer Darvish a six-year, $120 million deal that is structured this way: $30 million in each of the first two seasons, $20 million in the middle two and $10 million in the final two, with Darvish having opt-outs after Years 2 and 4.
    Darvish has $120 million guaranteed. If he is healthy and pitching well, he can opt out after two years in which he averaged $30 million a season or four years in which he averaged $25 million.

    The key for the Yankees in this structure is that for tax purposes, they would get charged $20 million in 2018 — the average value of $120 million spread over six seasons.

    If Darvish, say, opted out after the 2019 season, the Yankees would be hit with what is termed a “true-up charge.” That is the difference between what Darvish was actually paid in 2018-19 ($60 million) and what the Yanks paid toward the tax ($40 million). But the key for the Yanks is that $20 million “true-up charge” is placed on their 2020 payroll. In 2018, Darvish’s salary for luxury-tax purposes remains $20 million, although he is paid $30 million.

    I asked both the Commissioner’s Office and the Players Association if this deal would be scuttled for purposeful circumvention of the tax, and neither side suggested it would be.
    And look, this is just me guesstimating what Darvish would need. But maybe it is even less. If, for example, the Yankees could pay Darvish $50 million over the first two years, then the salary for luxury-tax charge drops to $18.3 million at a time when the Yankees will be counting every penny to stay under the threshold."

    https://nypost.com/2018/01/17/is-thi...vish-a-yankee/
    People don't start playing ball at your age, they retire!

  11. #386

    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Ken711 View Post
    And he would waive his NTC why?
    Because he likes to play baseball?

  12. #387

    Re: MLB free agency: Yankees targeting Yu Darvish

    Quote Originally Posted by Judgezilla View Post
    Because he likes to play baseball?
    And he likes getting paid, which he can still do with the Yankees. I didn't see him complaining much last season from not being a starter anymore.

  13. #388

    Re: MLB free agency: Yankees targeting Yu Darvish

    If Yankees could really get Darvish around an 18M AAV, they would only have to move a smaller contract (warren? Betances?) in order to fit him in and stay under LT going with Andujar and Gleyber, Wade, etc for 2nd/3rd base.

    We'll see if A. Cashman can get that AAV or B. if he really even has the interest they're saying he does.

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